Forensic Accounting

What is Forensic Accounting?

An orderly analysis, investigation, inquiry, test, inspection, or examination along a “paper trail” in the search for fraud, embezzlement, or hidden assets

Two parts:Investigative accountingLitigation support

Treats all figures as suspect until proven otherwise

The Fraud Triangle

Motive

Rationalization

Opportunity

The Need for Forensic Accountants

Fraud is something the internal or external auditorswere supposed to guard against through theirperiodic audits. Now that auditors can only check for the compliance of a company’s books to generally accepted accounting principles, auditing standards,and company policies, a new category of accounting was needed to detect the fraud in companies that suspected fraudulent transactions.

The Services a Forensic Accountant Provides

Investigating and analyzing financial evidence. Developing computerized applications to assist in the analysis and presentation of financial evidence. Communicating their findings in the form of reports, exhibits and collections of documents. Assisting in legal proceedings, including testifying in courts, as an expert witness and preparing visual aids to support trial evidence.

Investigative Accounts

Often associated with investigations of criminal matters. For eg: A typical investigative accounting assignment would be an investigation of employee theft.

Review of the factual situation and provision of suggestions regarding possible courses of action. Assistance with the protection and recovery of assets. Co-ordination of other experts

Litigation Support

Provides assistance of an accounting nature in a matter involving existing or pending litigation. It deals primarily with issues related to the quantification of economic damages.

Assistance in obtaining documentation necessary to support or refute a claim. Review of the relevant documentation to form an initial assessment of the case and identify areas of loss. Assistance with settlement discussions and negotiations.

Functions Of Forensic Accountant

Criminal Investigations Shareholders' and Partnership Disputes Professional Negligence Business Economic Losses

Typical Approach To An Assignment

Meet with the client Perform a conflict check Perform an initial investigation Develop an action plan Obtain the relevant evidence Perform the analysis Prepare the report

The need for niche consulting

Niche consulting refers to the need to specialize.The need for niche consulting has become imperative because: Recent corporate accounting scandals Outcry for transparency and honesty in reporting Fast based development in business

Characteristics to be possessed by forensic

accountant

Curiosity Persistence Creativity Discretion Confidence Sound professional judgment

Courses available in India

Post Graduate Diploma in Forensic Accounting Certificate Course in Forensic Accounting Profession Certified Anti-Money laundering Expert Certified Bank Forensic Accounting Certified Vigilance and Investigation Expert

Conclusion

Forensic accounting has come into the lime light due to following reasons:-- rapid increase in frauds and white collar crime-- belief that law enforcement agencies have insufficient expertiseForensic accounting, in fact, integrates accounting, auditing, and investigative skills to conduct an examination into a company’sfinancial statements.While the forensic accounting and auditing practice had commenced in the US as early as 1995, the seed of this specialization has yet to take off in India.

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